For Puerto Rico, how many stakeholders are too many? Former energy regulator considers island’s recovery and future

October 15, 2018

Jóse Román Morales, former Chairman of Puerto Rico’s Energy Commission, sat down with New Energy Events recently and shared his views on the resilience of the newly reconstructed grid, impediments to investment, and the independence of the new Energy Bureau.

Do you believe that Puerto Rico’s reconstructed grid is better able to withstand and recover from an extreme weather event than it was a year ago before Maria?

Some areas will be more resilient, and others will not. During the aftermath of Maria, there was an urgent need to restore power which meant both permanent and temporary fixes. There are areas which have been strengthened with new poles and wires, and others which have been patched together using whatever was available.

Truth be told, then, the grid was not fully reconstructed with resiliency in mind. For a system to be resilient, there needs to be a systematic plan for grid strengthening and the deployment of smart grid technologies. We haven’t yet seen either of the above – and nor have we seen the findings of the integrated resource plan which is currently under development.

Another essential component for grid strengthening is tree trimming and vegetation management. Hurricane Maria devastated a big portion of the island’s vegetation, arguably removing future hazards to the grid. Before Maria, however, PREPA had a tree trimming backlog. The utility has to put adequate resources in place to ensure that in the future backlogs are avoided.

There are however, lessons learned – not least that there needs to be a better emergency plan for fuel support logistics and communications.

What is holding up investment in Puerto Rico’s energy sector?

At the utility scale level, the hold-up is, simply, uncertainty. There are too many entities at the Commonwealth and federal level with a say on the future of the energy sector. Each entity has its own vision for the future and that, frankly, is problematic. All the while various initiatives are underway: there is a market-sounding process taking place, a new regulatory agency, and the development of a new energy policy for Puerto Rico.

In their own right, each is important – but each also raises questions for investors as they grapple with the implications.

The elephant in the room is the flow of federal funds to energy projects. Funds are ear- marked for Puerto Rico. What do we in Puerto Rico need to do, and what provisions do we need to put in place, to encourage federal law-makers to release more funds more quickly? That is the million-dollar question.

How confident are you that the restructured Energy Commission, soon to be described as the Energy Bureau, will have the independence it needs to regulate Puerto Rico’s energy sector effectively?

What do we mean we talk about independence? Independence from what?

Independence in this instance means independence from external forces which would jeopardize the agency’s ability to regulate the electricity sector in the public interest. That’s the context; this is what’s happening: the Energy Commission has officially been restructured as the Energy Bureau. The Energy Bureau (EB) is for all intents and purposes a new regulatory agency. It is part of the Public Services Regulatory Board (PSRB). The PSRB is a three-member board which sits above the five-member Energy Bureau. It is not entirely clear at this stage how independent the EB is from the PSRB and precisely the nature of the relationship. What is clear, however, is that the new structure has introduced additional layers of bureaucracy and the potential for inefficiencies.

The learning curve will be steep but as you would expect I hope that the Energy Bureau is able to regulate independently and effectively.

As chairman of Puerto Rico’s Energy Commission, you began the process of regulating to attract investment in microgrids and distributed generation. Do you think we will see that market take off?

The DG market is clearly taking off and there appears to be momentum in the market for industrial microgrids. Resiliency is clearly a big driver here. The availability of financing and cost effectiveness also clearly vital considerations underpinning the success of the new market. What’s clear, however, is that as we enter a new hurricane season the demand for resilient self-generation solutions will only grow. Source: newenergyevents